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shhoooop t1_iy6exc9 wrote

According to the PF flow chart, saving for a house is at the end (of the chart). Not before saving for retirement.

https://imgur.com/CcEVQAV

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badboyzpwns OP t1_iy6gbgx wrote

Thanks! Oh I do see it now, it says to save 15% for your 401k, why 15%? Does this also apply for IRA?

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Werewolfdad t1_iy6h17a wrote

15% will ensure you have enough to retire

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badboyzpwns OP t1_iy6hcy5 wrote

Thanks!

However, that 15% can differ depending on your salary For example, if i make 40k vs 150k.

What justifies that 15% is a good enough number? I am following the trinity rule for 40k withdrawal in your retirement years and i am curious where 15% comes into play

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dslpharmer t1_iy6ihee wrote

That 15% assumes that your quality of life in retirement won’t plummet and that you may even spend more if you’re traveling and taking up expensive hobbies.

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MrBalll t1_iy6jecn wrote

>This. If you only make 40k a year you live off that and that is what you are used to. So no matter what you make per year, you will be comfortable living off the 15% contributed once you reach retirement.

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badboyzpwns OP t1_iy6ljyi wrote

Thanks! That makes sense, but why is the number 15%? Is it based on a study like the trinity study? For example, contributing 15% of 40k salary vs 15% of 150k salary, will yield signficiantly different results!

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MikeWPhilly t1_iy6v8ju wrote

You seem to be missing that somebody with $150k salary probably spends more day to day than $40k. Generally speaking the goal is to have the same, or better, lifestyle in retirement.

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dslpharmer t1_iy7o3up wrote

Has to do with percent of income replaced at retirement with savings, projected spending, and growth assumptions. Fidelity has an article that says the modeled it over $50,000-300,000 per year salary. This is for replacing approximately 45% of income with savings. If I retired today, SS would replace 26% of income.

Most importantly, the general rule is when you make more, you spend more. Car, convenience, house, clothes, food, entertainment, kid activities, vacations, etc. Some of that may diminish when you retire, but to replace a big chunk of income, you want big savings.

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badboyzpwns OP t1_iy9jm3r wrote

Thanks! I saw the fidelity article now and it make sense!

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Werewolfdad t1_iy6iqgh wrote

Pretty sure the 15% was based on the Trinity study

> However, that 15% can differ depending on your salary For example, if i make 40k vs 150k.

Don’t understand what this means. 15% is 15%

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badboyzpwns OP t1_iy6lfra wrote

Sorry! what I meant was, contributing 15% of 40k salary vs 15% of 150k salary, will yield signficiantly different results! So why 15%?

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Leading-Hat7789 t1_iy7m0oi wrote

There are always exceptions to the rule, but this flow chart is almost always the best decision.

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